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EuroChem eyes Mena food security opportunity

24 August 2023

 

EuroChem Group is one of the top three global fertiliser producers and is one of only three firms worldwide with manufacturing capacity in all three primary nutrient groups: nitrogen, phosphates and potash.

Headquartered in Switzerland, EuroChem operates manufacturing facilities in Belgium, Brazil, Kazakhstan, Lithuania and Russia, employing over 27,000 people in 40 countries. Its products are exported to more than 100 countries.

In the wake of the Russia-Ukraine war, however, the company has found itself caught in the net of economic sanctions imposed by the EU and its member states on companies doing business in Russia.

The financial sanctions, which included the freezing of its bank accounts, caused EuroChem to look to set up a branch outside Europe from which it could continue to do business with its customers. The company opened a trading outpost in Dubai earlier this year.

“Recently, we have moved some of our trading functions to Dubai to be closer to our clients in Asia, Africa and the Indian subcontinent. These regions present great growth opportunities for our business and will add to our strong market presence in Europe and the Americas,” says Samir Brikho, executive chairman and CEO of EuroChem Group.

“While EuroChem remains a Swiss company with global operations across most major agricultural markets, establishing this new branch in the Middle East will position us to expand our operations in the region, as well as across Africa and Asia.” 

Regional strategy

EuroChem is looking to tap into the opportunities presented by the efforts of countries in the Middle East and North Africa (Mena) region to address food security challenges.

“We believe the region presents production and sales opportunities that are aligned to our long-term growth ambitions. We are discussing partnerships and investments that could further bolster our regional presence,” Brikho says. 

“We know the potential is there. In 2022, EuroChem sold almost 140,000 tonnes of fertilisers and industrial products to the Mena region, including more than 40,000 tonnes sold to the Middle East,” he says, adding that the firm is also committed to making a contribution to food security in Africa.

“We recently appointed a head of strategy for Africa who will help us to identify opportunities for investment on the African continent.”

The availability of commercially-feasible natural gas as a feedstock is one of the key criteria for fertiliser producers such as EuroChem to consider when investing in output expansion projects. 

“Gas is an essential feedstock for the production of nitrogen fertilisers and an important input for phosphate fertilisers. Both fertiliser types are produced by EuroChem. As with all input materials, the availability of natural gas, at the right price and in proximity to our operations, is essential for our production and business model,” Brikho says.

When it comes to potentially expanding EuroChem’s business in the UAE beyond the sales branch, Brikho says: “The UAE is perfectly positioned as a major commercial, manufacturing, logistics and export hub with more than 40 multidisciplinary freezones.

“However, fertiliser production is reliant on proximity to its raw material supply chain of ammonia, natural gas, phosphate rock and potash. 

“At present, we have no plans to invest in production facilities in the UAE, but if we identify opportunities that make business sense, then it will most certainly be considered.”

Addressing food security

Food security is a growing global challenge, and for the Mena region, which is primarily an importer of food products, the challenge is steep. 

The situation has been made worse by rising global inflation spiking food prices, especially those of agricultural produce.

The high cost of fertilisers for farmers has played a part in pushing food prices even higher in recent months, mainly as a consequence of the Russia-Ukraine war.

“The fertiliser industry has faced multiple sanctions-related obstacles that have disrupted production, access to finance, logistics and supply chain networks. Taken together, this had a devastating impact on global production last year,” says Brikho.   

The fertiliser industry has faced multiple sanctions-related obstacles that have disrupted production

“In Europe in particular, the inconsistent application of EU policies relating to sanctions had profound effects that curtailed production and caused shutdowns of European fertiliser production facilities. This led to reduced supply and availability and drove up costs.”

During last year’s peak, fertiliser prices increased by up to 300 per cent compared to 2021, affecting farmers globally, he continues.

“Now, we are seeing the longer-term impacts this has had on food availability and prices globally, where it is always those who can least afford it who suffer the most.”

EuroChem is doing its part to address food security and challenge the issue of rising costs, the CEO says. 

“At EuroChem, we are united with international farmers and those from regions such as Mena that rely heavily on food and fertiliser imports.”

International governments need to put policies in place that "protect the global agricultural supply chain from the types of disruption and volatility brought on by geopolitical events and sanctions that we have experienced over the last year”, Brikho adds. 

“We have to work together to mitigate against shocks that continue to impact food production, availability and the price of feeding our communities – and in particular those communities in poorer countries that are the most vulnerable.” 

Main image: EuroChem's facilities in Antwerp, Belgium

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Indrajit Sen

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    The 170-storey Jeddah Tower will have a variety of revenue streams and will
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  • Saudi Arabia’s football vision goes global

    27 September 2023

    MEED's October 2023 special report on Saudi Arabia also includes: 

    > POLITICS: Saudi Arabia looks both east and west
    > GIGAPROJECTS: Gigaproject activity enters full swing
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    Establishing the Saudi Pro League as one of the best will enhance the kingdom’s desire for a say at the highest levels of global club football

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    There are also signs that the British football boom, which began after the English premiership was created in 1992, is coming to an end. Top clubs enjoyed a windfall from satellite television rights and then the influx of investment from wealthy individuals, starting with Russia’s Roman Abramovitch 10 years later. This has now been overshadowed by the financial might of Abu Dhabi and Saudi Arabia in England and by Qatar, owner of Paris Saint Germain since 2011, in France.

    But the appetite among even the wealthiest investors for football assets may be fading. Earlier this year, Manchester United’s owners rejected an offer for the club from Qatar as inadequate.

    Sports Saudisation

    Saudi Arabia’s new approach is different. Instead of sending money overseas, it is looking to invest heavily in football within the kingdom. In the 2023 summer transfer season, Saudi Pro League clubs spent a net $907m on players, more than all of the Big Five leagues but the Premier League, which spent $1.39bn.

    The economic benefits are easily comprehended. PIF finance would go into building domestic stadiums and training facilities. Money paid to players and support staff would be retained in the kingdom. In addition to a domestic audience of football fans, Saudi Arabia has international airports and an aviation network to bring in fans from across the globe.

    Establishing the Saudi Pro League as one of the best will enhance the kingdom’s desire for a say at the highest levels of global club football. 

    European football’s perilous financial position is why plans for a European Super League comprising 12 teams, announced in the spring of 2021, initially attracted support from the clubs involved. It was scrapped at the last minute, but dreams of a super league – and the problems that inspired it – remain. It is conceivable that the kingdom could argue a case for membership should it be revived, though that is a consideration for the future.

    In the meantime, Saudi Arabia’s impact on football is already being felt. Last December, Portugal’s Cristiano Ronaldo signed for Riyadh’s Al-Nassr. Other top players that have since signed to play in the kingdom include Brazil’s Neymar, Ballon d’Or holder Karim Benzema, African Footballer of the Year Sadio Mane, World Cup winner N’Golo Kante and former Liverpool captain Jordan Henderson.

    In July, Kylian Mbappe turned down an offer from Riyadh’s Al-Hilal worth almost €300m ($321.5m) and a salary of €200m for a one-season stay. But – in what would be a coup for the Saudi league if it is accepted – a world-record signing fee is reported to have been offered by Al-Ittihad in September for Egypt’s Mohamed Saleh.

    Newcastle United could fit into the kingdom’s broader football plan as a source of talent that can be sold to the Saudi league to bring money into the English club while avoiding the fair play charges encumbering Manchester City. The first example of the process may have been Allan Saint Maximim, who was transferred to Al-Ahli for a reported transfer fee of almost $30m in July.

    Last summer, Riyadh also launched what is now the Liv Golf League. There has also been talk of it buying a US National Football League club. The kingdom is investing in other sports as well, but it is football that it is bringing home this autumn.

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    Edmund O’Sullivan